Financing Universal Health Coverage
A HIGH-Level Expert Group set up by the Planning Commission under the Chairmanship of Dr Srinath Reddy had, in a report submitted in November 2011, outlined a scheme of universal health coverage for the Indian population. The Group had explicitly argued against the use of insurance companies or any other independent agents to purchase healthcare services on behalf of the government; it had recommended instead that these services should be provided to the people from public healthcare facilities, and additional services might be purchased by the government from contracted-in private providers.
It had therefore rejected the logic underlying schemes like the Rashtriya Swasthya Bima Yojana, which is a health insurance scheme for BPL families: each family is entitled under it to a maximum hospitalisation expense of Rs 30,000 per year, and the central and state governments share the insurance premium in the ratio of 75:25. In fact the Expert Group had recommended that all such insurance schemes should be withdrawn over time and the expenditures incurred on them should be devoted instead to the universal health coverage programme.
Regarding the finance for such a programme, it had suggested that no levies should be imposed upon those seeking healthcare services, but that general tax revenue should instead be the principal source of funding. Accordingly its recommendation had been that the total public expenditure on health (and that includes spending by both the central and state governments), which had been 1.2 percent of the GDP at that time should be raised to 2.5 percent by the end of the 12th plan (2016-17) and to at least 3 percent by 2021-22.
Not only has the central government not accepted this report, but the magnitude of public health expenditure as a proportion of GDP has remained stuck at 1.2 percent of the GDP, the same as in 2010-11, even according to the union government’s own Economic Survey for 2014-15. In fact the talk now is that any expansion in the provision of healthcare should be through an expansion of the RSBY itself.
Such an idea may not appear unreasonable at first glance. It may not perhaps be the first best solution to the people’s healthcare needs, which the Expert Group’s scheme may be; but, one is tempted to think, surely it constitutes a second-best solution. This impression however is misleading: an expansion of the insurance scheme, such as we have had, has very serious harmful consequences.
The reason for this is quite simple. Since the governments, both at the centre and the states, incur the cost of the insurance premium under the RSBY, they typically start cutting down on public health expenditure, including what is needed for the upkeep of public hospitals. As a result while the public healthcare facilities languish, the people are increasingly forced to access private facilities. They therefore cease to get the range of free healthcare services from the public facilities which they had been getting earlier and which they should be entitled to get anyway in addition to the RSBY even when the latter is in force. At the same time, however, to entice private facilities to be enrolled for the RSBY, the charges for various procedures which are permissible under the RSBY have to be kept at suitably high levels; and this means that the maximum of Rs 30,000 per BPL family per year does not actually go very far.
The RSBY in short comes with a cost. Even if it is conceded, for argument’s sake, that the BPL families become net gainers from the scheme, though this itself is doubtful, the non-BPL families almost certainly become net losers. And given the fact that the central government’s completely flawed method of measuring poverty, as is well-known, keeps the number of BPL families to a minuscule figure, the bulk of the people end up being losers owing to the introduction of the RSBY.
KERALA, A MARKED
Kerala under the LDF regime, however, was a marked exception to this general scenario. And this was so for a number of reasons. First, even though perforce it adopted an insurance scheme (since it lacked the resources for a universal public health service on the lines of Britain or the Scandinavian countries), it did not keep the scheme confined to the tiny segment of the “poor” as defined by the Planning Commission; under a scheme of its own called the “Comprehensive Health Insurance Scheme” (CHIS), within which the RSBY was embedded, it used its own resources to cover almost 60 percent of the state’s population. Second, it also provided, in addition to the Rs 30,000, as under the RSBY, an additional Rs 70,000 per family to cover the treatment of “critical illnesses”, which the RSBY does not cover, at government hospitals. Third, it did not reduce expenditure on public health facilities even as it paid out the insurance premium for CHIS. And, fourth, it fixed the charges for various procedures at a low level, lower even than what the central government had recommended under the RSBY. While this kept out up-market private hospitals from the scheme, all public hospitals were asked to enroll under it, so that they actually got a larger inflow of funds, coming to them from two sources: the normal fiscal allocation and, in addition, the insurance payment (a part of which came from the central government through the RSBY).
The insurance scheme in Kerala under the LDF, in short, strengthened the public healthcare system, but this was an exception. The rule has been a weakening of the public healthcare system, and a consequent healthcare deprivation for the bulk of the people, owing to the governments’ following the insurance route. Ironically, however, it is this route which is favoured under neo-liberalism, and, needless to say, by the present NDA government.
The question may be asked: do we have enough resources to introduce a scheme of universal health coverage? For answering this, let us take the Expert Group’s figures as correctly representing the resource requirement. The Expert group however had been particularly cautious in asking for an increase in public health expenditure to 3 percent of GDP by 2021-22; it should have asked for the 3 percent target to be achieved by 2016-17 itself. Is this possible?
To this one can give a general answer and a specific one. The general answer is that an increase in public health expenditure by a mere 1.8 percent of the GDP is not such an insurmountable task; indeed the tax concessions given out to capitalists in the last few budgets entail an annual loss to the exchequer that is several times this figure. Simply undoing even a part of those concessions in other words would be more than adequate to finance a scheme of universal public health coverage.
A TAX ON STOCK MARKET
One can however suggest a specific tax, which, even if everything else is left exactly as it is, can yield enough revenue to finance a scheme of universal health coverage, and this is a tax on stock market transactions. The value of transactions on the stock market of course varies a great deal from one day to the next, but if we take the average for the months of September and October of this year, the figure comes to Rs 2 lakh crores per day. Now, 1.8 percent of the GDP at current market prices, if we extrapolate existing trends, should be 2.7 lakh crores in 2016-17. If a tax of only about .37 percent is imposed on every stock market transaction, then even if we make the extremely conservative assumption that the value of stock market transactions remains unchanged between now and 2016-17, even as the GDP at current prices keeps increasing, we would be able to finance a scheme of universal health coverage. In other words, even if everything else is assumed to remain unchanged and we merely impose a .37 percent tax on stock market transactions, we should be able to finance a scheme for universal health coverage for the entire population of the country.
To be sure, since the stock market fluctuates a great deal, the tax revenue from this source would also fluctuate, but the average should still suffice. And in case there is a prolonged slump in the stock market owing to an accentuation of the crisis of world capitalism, which is quite likely, then what is left uncovered by the shortfall in this tax revenue can always be covered through a fiscal deficit; and in a situation of a slump, an increase in the fiscal deficit, if accompanied by appropriate controls over cross-border financial flows, has a positive effect anyway. A minuscule stock market transaction tax, supplemented in the specific conjuncture of a slump by an increase in the fiscal deficit, should thus suffice for financing a scheme of universal health coverage.
How large, it may be asked, is a .37 percent transaction tax? Just for comparison, I should mention here that James Tobin, a cautious and middle-of-the-road economist who had no intentions whatsoever of rocking the capitalist system but who had suggested a currency transaction tax (the “Tobin Tax”) for slowing down the dizzying pace at which speculative capital moved across international borders, had mentioned a figure of .5 percent for his tax. What is being suggested here is even less than what Tobin had suggested! It requires however the shaking off, at least in this one instance, of thralldom to the corporate-financial oligarchy.